Federal Estate Tax Equality For Same-Sex Couples

On June 6, 2012, in Windsor v. United States, U.S. District Judge Barbara Jones in the Southern District of New York granted summary judgment to Edith Windsor and created a precedent that is likely to positively affect same-sex married couples for years to come. Edith was awarded $353,053, plus interests and costs for the federal estate tax that she was wrongfully required to pay upon the death of her beloved wife.

Edith met her late spouse, Thea, nearly 50 years ago in New York City. Even though no state in the United States afforded legal recognition to same-sex couples, in 1967, Thea proposed to Edith. In 1977, Thea was diagnosed with multiple sclerosis, which gradually debilitated her over the years and made her a quadriplegic. After being engaged for 40 years, in 2007, Thea and Edith decided to legally marry in Canada since same-sex couples were still not permitted to marry under New York law. Their marriage in Canada was recognized in New York because New York affords legal recognition to civil marriages that are lawful in the jurisdiction where they are performed. See Matter of the Estate of Ranftle, No. 4585-2008 (N.Y. Sur. Ct. Jan. 26, 2009). On February 5, 2009, Thea lost the fight against her health battles and passed away, leaving her entire estate to Edith. In June 2011, New York became the sixth state to allow same-sex couples to marry.

While Thea's estate slightly exceeded the applicable federal exclusion amount set forth in 26 U.S.C. 2010(c), under 26 U.S.C. § 2056(a), a decedent's estate is generally entitled to an unlimited marital deduction for the value of any property that passes from the decedent to his or her surviving spouse. Whether a couple is married for purposes of the estate-tax marital deduction hinges on whether the couple is considered validly married under the law of the state. See Eccles v. Comm'r, 19 T.C. 1049, 1051, 1053-54 (1953).

While on its face, the estate-tax marital deduction applies to all legally married couples, same-sex couples have been denied these benefits due to the plain language of the Defense of Marriage Act (DOMA). Section 7 of DOMA provides:

"[i]n determining the meaning of any Act of Congress, or of any ruling, regulation, or interpretation of the various administrative bureaus and agencies of the United States, the word 'marriage' means only a legal union between one man and one woman as husband and wife, and the word 'spouse' refers only to a person of the opposite sex who is a...